Nigeria is drawing up plans to defend the country’s banking system amid fears that bad loans racked up during a frenzy of stock market speculation could put some lenders in danger.

Chukwuma Soludo, the governor of the Central Bank of Nigeria, told the Financial Times that the government was looking at creating an asset management company backed by state and private funds that could offer to buy bad debts.


But he dismissed calls from foreign investors for greater disclosure among Nigerian banks to reveal the true scale of their losses on the stock exchange, which has lost 60 per cent of its value in the past year.

“We don’t even need them to start with,” Mr Soludo said. “The foreign investors do not matter in this discussion. What they think does not matter to us. What matters first and foremost is what Nigerian investors think and what they do.”

His comments may surprise fund managers who had come to regard Mr Soludo as one of the champions of a process of economic reform begun under the previous government, which helped to transform Nigeria into a credible frontier ­market.

The governor, who has repeatedly offered assurances that the banking system is solid, said he would act if any individual bank suffered a shock.

“Any time, any day, a bank could run into trouble, anywhere in the world,” he said. “You have a plan in place to be able to take the bank out of the system and make sure it doesn’t cause a contagion, it doesn’t snowball into a systemic crisis.”

Nigerian officials have increasingly laid the blame for the collapse of the market on foreign investors who withdrew their money at the height of the credit crunch. The director-general of the Nigerian Stock Exchange was quoted by local newspapers last month as referring to such investors as “financial prostitutes”.

Standard Bank says international portfolios withdrew $3.1bn (€2.5bn, £2.2bn) from the Lagos stock market from August to December. But it estimates that international funds never held more than 15-20 per cent of total market capitalisation.

Many in the Lagos financial community argue that Nigerian regulators bear a greater share of responsibility for allowing reckless lending among banks for share purchases that inflated a classic asset bubble. The subsequent rout has fuelled speculation that Mr Soludo will not be reappointed by Umaru Yar’Adua, the president, when his term expires in May.

Mr Soludo argues that even if all the banks’ exposure to the stock market had to be written off then capital adequacy ratios would still remain at a healthy 15 per cent, higher than in many western countries.

But analysts say a lack of transparency among Nigerian banks makes it hard to be sure. Mr Soludo has put their exposure to the stock market at about 900bn naira ($6bn, €4.8bn, £4.3bn). Renaissance Capital estimates the figure to be 1,000bn naira, or 20 per cent of loans.

Stocks in some banks have shed at least 70 per cent of their value since last March. A slowdown caused by falling prices for Nigeria’s oil exports is likely to create additional pressure.

lucabrasi:

nigeria doesnt need foreign investors if soludo and the rest get their acts right,the countries that insulated themselves from the global financial market,are the only ones smiling now,notable examples like china and india are there for all to see.
the reason foreign investors left the shores of nigeria,is because of the cost of running their business,electricity e.t.c and the stress associated with it,so lets not kid ourselves,shell and the rest are not leaving in a hurry because their over heads is being taken care of in the slush profits they are making

lucabrasi:

nigeria doesnt need foreign investors if soludo and the rest get their acts right,the countries that insulated themselves from the global financial market,are the only ones smiling now,notable examples like china and india are there for all to see.
the reason foreign investors left the shores of nigeria,is because of the cost of running their business,electricity e.t.c and the stress associated with it,so lets not kid ourselves,shell and the rest are not leaving in a hurry because their over heads is being taken care of in the slush profits they are making

ikeyman00:

soludo na igbo man, he knows wetin he de do. 

all these yeye self-quack economics self!

foreign investors, my ass, i said slavery investors

why dnt ibb,obj and co invest in nigeria like arabs, chinese

idotssssssssssssss

go see how russia and china do de block oyibo for their borders with their wealth

idotsssssssssssssssssssssssssssssssssssssssssssss!!

doyin13:

@Ibime

lol . . .u, debo and 4play want to drive us beer parlour pugilists away abi.

U shall not succeed.

--------------------------------------------------------------------------------
Why does anyone ever take this ikeyman00 idiota serious?

Every situation to him na igbo this and igbo that.

What kind of democratic country is this sef?

Sometimes I wonder why we can't take back the money our afore presidents STOLE from us. I mean, were they not found guilty?

Are we even sure it's our people lending, not the govenors, senaors, president etc stealing from the banks?

Sometimes I just dnt want to care about this country anymore. Rubissssssssssssssssshhhhhhhhhhhh

ikeyman00:

Yoruba take am easy oo! fool

ikeyman00:

soludo na igbo man, he knows wetin he de do. 
all these yeye self-quack economics self!

foreign investors, my ass, i said slavery investors

why dnt ibb,obj and co invest in nigeria like arabs, chinese

idotssssssssssssss

go see how russia and china do de block oyibo for their borders with their wealth

idotsssssssssssssssssssssssssssssssssssssssssssss!!

GatorLink:

Do you ever respond with sense?hiss

NEXT!

ikeyman00:

osisi

we will soon disown u

ikeyman00:

limitation gone mad right

osiso can u ichatture t

debosky:

I think you are misreading Soludo's comments - he is in essence saying the concerns of foreign investors should not dictate Nigeria's banking/disclosure policy - the concern should be focused on the needs or demands of the local market not pandering to foreign investors.

Till banks declare their next annual results, we should wait to see what levels of bad loans they have on their books. As long as they are complying with CBN rules and bear significant capital adequacy ratios, making losses in the stock market should not be such an issue.

The banks will learn from this and will be more prudent with loans in the next 'boom' in stocks.

With all the calls for 'transparency', even in the UK, till the 'toxic debt' insurance schemes took place, no one knew exactly what scale of bad loans were held in HBOS, so what level of 'openness' are we requiring here? The key thing is for the regulators to have a good grasp of the internal operations of these banks and ensuring that they get tougher on erring banks.

The asset bubble phenomenon is not restricted to Nigeria, there were bound to be missteps with increasing capital bases and little investment into the real sector. A lot of these funds went into the Stock Market, but will be more prudently allocated in the future.

agabaI23:

If anyone needs disclosure, it is the local investors.
These are the people who bear the brunt when the chicken come to roast.